Walz announces 2-year budget proposal including tax hikes on Minnesota’s highest earners

Tuesday, Gov. Tim Walz proposed raising taxes on the wealthiest Minnesotans and large companies to help plug a projected $1.28 billion gap in the next two-year budget, while increasing spending on education and on helping the state recover from the coronavirus pandemic. The tax increase would raise the taxes of married couples earning more than $1 million and individuals earning more than $500,000.

Walz’s plan aims to help working families while ensuring students catch up on learning and helping small businesses stay afloat after an extremely challenging year.

"Minnesotans have met the challenges of COVID-19 pandemic as they always do when faced with hardship – with grit and resiliency. Now, as we look toward the future, Minnesotans are ready to confront the challenges we face today while investing in a brighter future. That’s why I am proposing Minnesota’s COVID-19 Recovery Budget to ensure we emerge from this crisis stronger than before," Walz said.

"Not every Minnesotan was impacted by the COVID-19 pandemic equally. We know the COVID-19 pandemic hit our working families, small businesses, and students particularly hard. They need our help," Walz added. "The budget I am unveiling today will make significant strides in helping those Minnesotans stay afloat."

The Democratic governor’s budget proposal includes new spending of $745 million on education through 12th grade, in addition to recent federal aid of $649 million for helping schools bounce back from the pandemic. Walz also proposes spending $50 million on a new small business forgivable loan program to help the hardest-hit businesses sustain their operations and emerge from the pandemic, and wants to expand the Working Family Tax Credit for over 300,000 eligible households. Additionally, he recommends a one-time payment of up to $750 to about 32,400 working poor families who participate in the Minnesota Family Investment Program.

Walz’s plan sets up what is likely to be a fierce debate between Democrats and Republicans in the divided Legislature. While Walz said he’s open to compromise, he noted there are things he wasn’t willing to budge on and added that things like relief for small businesses are needed quickly.

The governor also noted that the plan was made without any reliance on another possible stimulus package from Congress but said he plans to adjust his proposal if a federal stimulus is passed, as he will after the state releases its updated budget forecast next month.

"This is a starting point," Walz said of the plan.

Senate Majority Leader Paul Gazelka (R-Nisswa) issued the following statement:

"I have been clear since day one of session: we are not balancing the budget with tax increases. A budget that increases taxes is not a Minnesota priority.

"People have suffered enough already. Employees, entrepreneurs, and many businesses have sacrificed for 11 months. The budget reserve can be used to protect people from hurtful tax increases that will further stretch their family budget and harm our economy. Senate Republicans will ask the government to tighten its own belt before we ever ask Minnesotans to tighten their belts even more."

House Minority Leader Kurt Daudt (R-Crown) issued the following statement regarding Walz’s proposal:

"We need to grow our way out of this recession; unfortunately this budget would devastate job growth and hamper our economic recovery by taking money out of the economy to protect government budgets. Putting Minnesota into the top 3 for income and business tax rates without asking government to share in the sacrifice would be a disaster but fortunately has no chance of becoming law this year.

"Minnesotans should know that Republicans have their back — we are going to ask state government to tighten its belt, do more with less, and balance our budget without tax increases that would hurt our economic recovery."

Speaker of the House Melissa Hortman (DFL-Brooklyn Park) and Majority Leader Ryan Winkler (DFL-Golden Valley) released the following statements:

"Minnesotans expect the state budget to help them weather this pandemic and then thrive once it ends. Governor Walz’s budget reflects the values of Minnesotans and incorporates the reality that COVID-19 has hit some people and businesses harder than others," Hortman said. "Minnesota is a state of abundance — we have abundant natural resources, thriving corporations and non-profits, a talented population, and higher income per capita than most states. We can and should use the budget to invest in Minnesota and in Minnesotans to ensure economic opportunity for everyone. The House looks forward to working with the Governor and the Minnesota Senate over the session to produce a budget that serves the needs of Minnesotans. I commend the Governor for a budget that moves in a bold and progressive direction.

"The Minnesota House DFL majority has begun discussing our budget priorities in committee, with House budget targets likely by March 22nd and our proposed complete budget by April 9th. We invite Minnesotans to engage in conversation with us through communicating with members and participating in our committee hearings and town halls to weigh in on our budget proposals as we work to shape a budget that reflects their values and meets their needs.

"We look forward to receiving the upcoming February budget forecast as another key building block in setting the stage for this year’s budget debate at the State Capitol."

"Standing up for Minnesota workers and families hit hardest by the pandemic must be the Legislature’s top priority right now," Winkler said. "COVID-19 has further divided Minnesota by income and race, and we cannot just return to the pre-pandemic status quo of haves and have-nots. A state government that serves the rich and well-connected is not doing the work of the people."

Senate DFL Leader Susan Kent (DFL-Woodbury) issued the following statement:

"This past year has presented us with challenges that we have not seen in recent history. It also amplified inequities that were already in our communities as we saw how this pandemic affected each of us differently," Kent said. "The Governor’s budget addresses the areas that need the support the most right now as we work to recover from the devastating effects of the pandemic – supporting our working families, offering relief to our small businesses and supporting our students. I am especially grateful that Governor Walz has put education equity front and center in this discussion as we owe it to every Minnesota child to ensure they are all given the educational opportunities to thrive, which are free from bias."

"Republican efforts to cut our way through this challenge is short-sighted. The Governor’s more balanced approach – modest strategic cuts, asking the wealthiest and most profitable Minnesotans to pay their fair share, and building up those who will make our state thrive as we move forward – will make sure Minnesota is best positioned for a strong future for all," Kent added.

The Associated Press contributed to this story.

Click the video box below to watch Tuesday’s full press conference.